How Trade Wars Impact the Tech Industry

Many people view the internet as being an international landscape, a place where every user is treated equally, as enshrined in the principle of net neutrality. However, we have learned that this is not the case. Within a year of Trump taking office, net neutrality was gutted in the US, opening the door for Internet Service Providers (ISPs) to charge extra for access to certain content or throttling the speeds at which other content is delivered. Geography also plays a role, as people are forced to use proxies to change their IP addresses. Yes, there are easy and quick ways to do that

As Trump’s “good and easy to win” trade war approaches its second year of not being won, the impacts are beginning to spread out across the American economy. The internet and the tech industry more broadly are starting to feel the pinch in a number of unexpected ways. The effects of Trump’s trade war are also spreading beyond the USA, especially with regard to the impact on the tech industry.

Vietnam

One of the few beneficiaries of Trump’s trade war has been Vietnam. The nation has been undergoing something of an economic boom recently, driven in part by the realization that the Vietnamese economy is actually bigger than the government thought it was. However, the trade war between the US and China has made Vietnam a suddenly very attractive supplier for a number of industries, especially the tech industry.

Multinational corporations that want to avoid the tariffs that the US has imposed on Chinese imports are increasingly turning to Vietnam. Many tech products can be manufactured just as easily in Vietnam with little difference in price. Once the added costs of the tariffs are factored in, even the more expensive production options in Vietnam start to make more economic sense.

GoerTek, the Chinese manufacturer of Apple’s AirPods, have already announced that they plan to move their production to Vietnam and are planning on investing $260 million in the venture. Similarly, Google has announced that it will be moving production of its Pixel smartphones out of China and into Vietnam. Other businesses have been avoiding the tariffs by simply having goods made in China and shipped to Vietnam so they can be relabelled and shipped to the US as if they were from Vietnam originally.

GitHub

A particularly striking example of how the trade war has been affecting the tech sector can be seen with GitHub. Beginning on 25th July 2019, reports began to come in from around the internet that GitHub users in some countries were finding their accounts locked with no prior warning. Many developers, including some prominent members of the GitHub community, took to social media in an understandable panic, having been unceremoniously booted out of their own accounts.

GitHub’s terms of service contain all the usual boilerplate clauses that we have come to expect, including one forbidding any users from countries subject to US sanctions from using the service. As is always the case with these ToS, GitHub places the onus for adhering to them on the user. While GitHub is within its rights, and perhaps even under legal obligation, to remove access to accounts that are covered by US sanctions, the way that they went about it caused a lot of understandable anger.

GitHub’s heavy-handed approach won it no support from its userbase, especially after reports started to emerge of users being banned despite having no affiliation at all with the affected countries. But perhaps the most galling part of the whole debacle for the affected users was that the other Git hosting platforms – GitLabs in particular – had taken a much more reasonable, some would say obvious, approach. 

While GitLab was moving their infrastructure away from Microsoft Azure and over to Google Cloud, Google informed them that they would need to observe their legal obligations. GitLab responded not by instantly banning users, but by informing the community of the situation and providing time and guidance to help them get everything moved over.

The GitHub incident was reminiscent of a similar incident the previous year that involved the productivity app Slack. Slack also banned a large number of users without giving them any prior warning, provoking the expected backlash from the community.

Other Impacts on the Tech Sector

Another prominent casualty of Trump’s trade war has been Huawei. Huawei has always been something of a controversial business in the west because of its close ties to the Chinese state. There are fears that the telecoms giant could be compelled to assist the Chinese government in espionage activities. Naturally, China and Huawei have always denied these claims. Whether national security was a consideration when Trump decided to ban the business from national infrastructure.

Since being added to the US Entity List, Huawei has been subjected to certain license requirements. This restricts the ability of US businesses to do business with Huawei without first obtaining proper authorizations. This has led to Google suspending Huawei’s Android license, meaning that the smartphone maker will now have to either develop their own operating system or use the open-source version of Android that doesn’t feature any of Google’s services.

In the aftermath of the Huawei news, it transpired that the business had been anticipating something similar for a while and had spent at least a year stockpiling critical US-made components that they might need for their smartphones.

Trade wars have a far-reaching impact. It often takes time for the full effects to manifest themselves. The impact of Trump’s trade war is being felt all over the world and is causing disruption to the internet and the tech industry more broadly on a global scale.

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